Hyderabad-based GVK Power & Infrastructure is close to raising a large private equity round for energy business. Sources familiar with the development say that the infrastructure major could be raising $280 million (Rs 1,300 crore) from private equity majors 3i Group plc and Actis. Both PE firms could be taking a $140 million exposure each in the recently restructured unit GVK Energy Ltd, said one source.
VCCircle last week reported that a private equity investment in GVK’s energy business is in the making.
GVK Group recently transferred its investment in GVK Industries Ltd, GVK Gautami Power Ltd, GVK Power (Goindwal Sahib) Ltd and Alaknanda Hydro Power Company Ltd to wholly-owned subsidiary GVK Energy. The group, which also controls Bangalore and Mumbai international airports, has also received shareholders approval for the move. These units have 901 MW of operational assets with nearly 2,500 MW under various phases of construction and development across gas-fired, thermal and hydel assets.
GVK Group CFO Issac George declined to comment citing a non-disclosure agreement. “We are looking at raising in the region of $250 million from private equity players. We have received interest from six to eight players. But, we have not finalised on any yet. We will take a call by early next month,” he told VCCircle last week on the possible fundraising by the group.
An Actis spokespersons said “no comments” when contacted by VCCircle. “We do not comment on deal speculation,” said the Actis spokesperson last week. “It is our policy to always to decline comment on any speculation about 3i Infrastructure investment fund,” said a 3i spokesperson.
3i invests in Indian infrastructure from a country-dedicated $1.2 billion fund and already has an exposure in energy business through a 7.37% stake in Adani Power. Actis closed its emerging markets infrastructure fund at $750 million last year and also invests through $2.9 billion Actis Emerging Markets 3.
VCCircle earlier reported that any deal for GVK Energy would not be a straight infusion and would likely be in form of convertible instruments.
GVK may also look for consolidating its holdings in power projects with this funding besides for financial closure for upcoming projects. While GVK Industries, GVK Power (Goindwal Sahib) Ltd and Alaknanda Hydro Power are wholly owned units, the group holds a 64% stake in GVK Gautami Power, which manages a 464 MW gas-based plant.
GVK Power & Infra acquired a 9.50% additional stake in GVK Gautami Power Ltd from Nagarjuna Construction to increase its holding in March this year. The balance stake in unit is held by Malaysia’s IJM, and Maytas Infra Ltd.
Several of its operational units are also reporting revenues and are profitable. GVK Industries, which has 437MW operational under two phases, reported combined revenues of Rs 205 crore first quarter of this fiscal. It is developing another 800MW capacity under phase III.
GVK Gautami Power, which is also developing another 800MW under phase II, reported revenues of Rs 238 crore for first quarter FY11.
GVK is alo reportedly in talks with PE firms to raise funds for GVK Airport Development Private Ltd, which holds its investments in Mumbai International Airport Ltd and Bangalore International Airport Ltd. An Economic Times report said last month that GVK is in talks to raise $400 million for this unit from Temasek Holdings, The Blackstone Group
& SBI-Macquarie Infrastructure Fund.
Power generation players have attracted significant capital from private equity players this calendar year, accounting for nearly a fifth of deal value. Electric utilities companies raised $943 billion across 12 deals in the first seven while overall PE inflows stood at $5.1 billion for the same period, according to VCCEdge.
Some of the largest deals include $425 million in Asian Genco by a consortium led by Morgan Stanley Infrastructure Partners and $305 million fundraise by GMR Energy from Temasek, IDFC Private Equity, Ascent Capital and others.